Rolling over my 401(k), and other transitions May 16, 2008

Well, I got the official paperwork today telling me about all the options I have for the money in my former employer’s 401(k) plan. They’ve given me plenty of options, some of which I think are not so good (i.e. taking the money out for myself), and the two that I’m mostly considering: roll over to an IRA or roll over to a new 401(k) plan. The problem with the latter option is that I don’t have a new job yet, and I don’t know if I’d even be able to roll over the 401(k) with them (it differs for different companies). So it seems that my best bet is to open a Traditional IRA and roll my 401(k) into that.

I’m going to open up an IRA with the same company that I have my Roth IRA with, and presumably buy a life-cycle/age-based/target-date fund with a target date of 2050 or so. My one concern is, even though these funds are supposedly diversified, I am thinking of investing in both IRAs in that fund…that’s not very diversified! However, there are minimums for purchasing a fund in many cases, so perhaps I’d just let my money grow using those funds (and continuing to invest in my Roth IRA), and slowly build until I have more money to spend on different funds.

At any rate, I’m thinking it’s still my plan to roll over to an IRA. I’m a bit ticked off that my old company’s 401(k) company is going to charge me a $40 processing fee, but hey, not much I can do. They charge it for pretty much every option that I would do.

As for my other transitions (since I got laid off), I’ve filed for unemployment and been informed of how much I’ll be earning each week, and of course, looking for a new job. And as I look at different job postings, I’m starting to understand what I do and don’t want to be doing. This is a pretty helpful development, since I was so overwhelmed initially thinking of all the different career paths I could follow.

I’ll keep you updated!

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8 Responses to “Rolling over my 401(k), and other transitions”

I’m just starting a new job and looking at the options for what to do with my old 401(k) — so we’re in the same boat. I’m leaning towards rolling into the new 401(k) but an initial glance at the paperwork left me somewhat perplexed. I’m going to have to look at them a little closer but I’ll keep you posted on what I end up doing.

I like the IRA idea better. Consider this. You aren’t locked in to the limited options offered by the 401(k) admin. Also, as time draws on, if you remain unemployed longer, you may have a chance to convert some /all of that money from IRA to Roth IRA, and pay minimal taxes. The beauty of the Roth is it can help you ‘top off’ your current bracket or take advantage of a lower one in a bad (income) year.
Joe

That’s my goal…diversify as I have more money. Especially because at this stage it’s probably ok to have more in stocks and the like. We’ve got years to make up for any losses. But those funds are pretty diverse anyway, at least buying up large sections of the market.

My end goal is a DIY target retirement fund of sorts through Vanguard. Shares in their S&P 500 fund, main bond fund, as well as some small/mid cap indexes (smaller percentage) and foreign market funds. I’ll check what they’re offering, of course, they may have one that’s just the right mix for me.

[…] What did I do? Since I was not happy with my investments in my old 401(k), I decided to roll my money over to an IRA. And since I already had a Roth IRA at Fidelity, I decided to open a rollover IRA there. It was pretty darn easy, and they answered all the questions and concerns I had. Plus they have a lot of investment options, many of which don’t require fees. I’ve heard good things of lots of the other investment companies, so take a look around your options before committing to a specific company. […]